On 3^rd July 2024, Vietnam took a major step toward a competitive electricity market with the issuance of Decree 80/2024/ND-CP (“Decree 80”).  The Decree 80 introduces a direct power purchase agreement (“DPPA”) mechanism that fundamentally shifts how renewable energy generators can sell electricity in Vietnam. Key contents are as below:

1. Previously, renewable energy generators such as solar and wind power generators could only sell electricity to the state-owned Vietnam Electricity Group (“EVN”). The Decree 80 changes this by allowing qualified renewable energy generators to bypass EVN and sell electricity directly to large electricity consumers through DPPA contracts. This introduces competition and gives flexibility in negotiating electricity supply agreements.

2. The Decree 80 introduces two definitions of participants to join the direct electricity trading mechanism as below:

• “Renewable Energy (“RE”) Power Generators” refer to power companies that own electricity plants powered by solar, wind, small hydro, biomass, geothermal, etc., other renewable sources, and rooftop solar systems with electricity operation license or exempted from such license.
• “Large electricity consumers (“LEC”)” refer to organizations and individuals that purchase electricity for their own use and do not resell to other organizations or individuals. To qualify as a LEC, the electricity consumption must be at least 200,000 kWh per month.

3. Direct electricity trading mechanism are conducted in the two models as below:

Private Line Model:The Private Line Model allows RE Generators and the LEC to negotiate electricity prices directly through a Direct Power Purchase Agreement (DPPA) without a template. The DPPA must include details such as contract subject, usage, service standards and quality, rights and obligations of the parties, electricity price, payment method, contract duration, and termination conditions. In principle, the electricity price can be mutually agreed upon by both parties (with exceptions as specified in the Decree 80). RE Generators must sell surplus electricity to EVN or authorized retailers, while LECs can purchase electricity from EVN or authorized retailers.

Though no registration is required for the Private Line Model, the LEC must inform the local People’s Committee, EVN, and the National Load Dispatch Centre after signing the DPPA.

National Power Grid Model:this model imposes eligibility requirements and registration procedures for RE Generators and LEC to participate:

• RE Generators must have minimum 10MW capacity and previous involvement in the wholesale electricity market.
• Eligible LECs must have ≥22kV connection voltage and ≥200,000 kWh monthly consumption.
• Eligible parties must register with the National Load Dispatch Centre, a 15 working day process.

There are several agreements that must be signed between the relevant parties, including:

• Power Purchase Agreement between RE Generators and EVN
• Retail Power Agreement between the LEC and the subsidiary of EVN;
• The forward contract between RE Generators and the LEC 

While Decree 80 allows negotiation of agreements between parties, it also provides strict stipulations on key provisions that must be included. Decree 80 also establishes pricing formulas and mechanisms that must be followed under the various agreements. By laying out these formulas, it creates standardized pricing approaches across the National Power Grid Model.

In summary, the Decree 80 shows Vietnam's commitment to developing a competitive power market and driving growth in renewable energy. Though some details remain to be clarified, it opens up opportunities for both RE developers and LEC.

We look forward to addressing any questions or concerns you may have about renewable power development in Vietnam.